Children left financially exposed by poor planning

Just one third of parents are considering opening a Junior ISA, according to new research from JP Morgan, despite the fact that 94 per cent admit to worrying about their child struggling financially.

The survey, which questioned 2,014 adults, also indicated that the thought of their child being unable to enjoy life due to financial constraints was a worry for 57 per cent of parents, and concerned them more than the thought that their child would be unable to find a job. In addition, 22 per cent of respondents said they didn’t think they would have enough saved up for their children once they reached adulthood.

"With recent figures showing youth unemployment in the UK currently standing at 22 per cent, it is unsurprising such a high proportion of parents are concerned about their children's future, particularly from a financial perspective," said Keith Evins, head of UK marketing at JP Morgan Asset Management.

"However, it is alarming that in spite of this only 35 per cent of parents are considering opening a Junior ISA. It is important parents understand there are few tax-efficient ways of saving and investing for the long-term and a Junior ISA is one of the simplest."

"Previous research we conducted shows that the likely average contribution into a Junior ISA would be £1,117 a year (£93 per month), which could mean a savings pot worth over £34,000 by the time the child turns 18."

Philip Haden, director of IFA McCarthy Taylor, expressed his surprise at the small proportion of parents considering Junior ISAs.

"Although this low take-up may be due to problems with affordability, as one of the most tax-efficient ways to save, this should be one of the first types of account that parents should consider for their children."

Of the surveyed parents that would consider opening a Junior ISA, more than one-third said they would sacrifice some of the contributions to their own tax-free wrapper in order to do so, while one in 20 said they would even cease investing into their own ISA altogether to fund their child’s one.

Evins continued: "The fact that parents are willing to sacrifice some of their own ISA contributions to help fund their child's future shows their commitment to investing for the future of their children. However, with minimum contributions from £50 per month, such sacrifices could be achieved."

"In addition, previous research by JP Morgan Asset Management showed nearly half of adults in Britain (43 per cent) would contribute to a Junior ISA for the child of a family member or friend. Such additional contributions could help enhance the savings parents are able to make."

Haden said: "Look at how the cost of essentials is increasing – the Government says inflation is at around 3.5 per cent, but for some people I wouldn’t be surprised if the true figure is in double-digits."

"Things are only going to get worse. If you want your children to be able to afford things like a car, a house or university fees, parents and grandparents should put money aside. You may even need to cut back a little yourself if you want to give them the best start possible."

Haden, however, sounded a note of caution against parents who sacrificed contributions into their own ISA to fund their child’s one.

"You need to look at the overall situation – although it is good for the child, they can’t access it until they are 18, at which point they have complete control over the investment. Is that really sensible?"